Lifetime Value Online?

In "Big Time Banner Advertising," we discuss importance of establishing an acceptable level of return for your promotional investments. This number becomes criteria for what is deemed a success and what is deemed a failure. How you determine this number is not only critical to success of your advertising efforts, it's also critical to ongoing success of your business in general. Many dot-coms make mistake of using a "lifetime value of a customer" calculation to determine their success criteria. They estimate how many purchases a customer may make from them over a long period of time. Then they calculate how much profit will be contained in all of these purchases. They will then use this "lifetime value" figure to determine how much they are willing to spend to acquire this customer. This is how some of these dot-coms can rationalize spending nearly $100 in promotional dollars for every unique customer buying $20 worth of books or CDs. Do lifetime value calculations even make sense in an environment where "switching" is so easy? In online business environment, it's very easy for your customers to simply click away to a better deal or a more appealing offer. Online, there are fewer opportunities for true customer lock-in. Sure, our customers have a certain level of familiarity with us that helps gain their loyalty. And, we may also offer our customers rewards or incentives to encourage their loyalty. But when compared to an offline lock-in such as location of your nearest grocery store, these types of online lock-in are clearly far more fragile.

About Your Work

I like Simon, one of three judges on American Idol. I find his feedback refreshingly honest. And while his words startle me with their ego wounding potential, traditional feel-good, let-you-down-easy, sugar-coated feedback is not much of a gift. It’s hard to tell someone they’re not good enough and their dreams are not going to happen, at least in this venue. But not telling them is no gift either. Some contestants rise to challenges he throws at them. Some don’t. And, some can’t. Which one are you?

The people who influenced me most in my career were those who gave me hardest critiques. Stricken with a bruised-ego for days, or on occasion for months, inevitably their feedback helped me make right life choices to improve, change direction, or stay course with intensity. In fact, boss who was hardest on me is one I thank most. Good was not good enough if I was capable of better, and she was quick to point out when that was. No sugar coating from her. And funny thing? When I was honest with myself, I knew she was right.

Being honest with yourself is one of challenges to winning at working. We all have talents and abilities, but they’re not always in areas we pursue at work. Too many people I’ve run across in my career have American Idol Syndrome (AIS). Like Idol contestants auditioning with little or no singing ability, these people believe they are good at what they do. They can’t understand why they don’t get promotion, outstanding review, or highest increases. They view themselves as varsity team material, but they play with junior varsity skills.